OneSMART Case Study: MasterCard and Cosmos Bank

MasterCard and Cosmos Bank team up to deliver a first-ever multi-application smart card in Taiwan
CompetitiveIn a word, that describes Taiwan's banking industry. Since 1995 when the government launched an effort to make the country an Asian Pacific regional financial center, the growth of financial services companies has been significant. Presently, Taiwan has a Central Bank, 47 domestic banks, five medium-sized business banks, and 41 foreign banks. How does an individual banking organization stand out from the crowd? In the case of Cosmos Bank, its by partnering with MasterCard International to provide innovative, forward-looking services designed to meet the needs of savvy, sophisticated consumers. Cosmos Bank has, in a short time, taken a leadership position in the Taiwanese banking marketplace by introducing the first Taiwanese multi-application smart card.
Established in 1992, Cosmos Bank initially specialized in the cash card business and teamed up with MasterCard in 1999 to launch a Maestro and Cirrus -branded card. Working essentially as a small revolving loan program, this card offered customers anytime, anywhere access to cash for emergencies and other needs.

some limited smart cards available along the way, no globally interoperable, highly secure smart cardsusing the EMV (Europay MasterCard Visa) worldwide standard were ever deployed. But the smart payment card was an idea whose time had come. In December 2001, the Taiwanese Ministry of Finance issued a government imperative to the banking community urging them to migrate to chip as a way to combat the widespread problem of credit card fraud. Awareness of chip technology and what it could do was growing, and market research revealed that consumer interest was high for a multi-application card. Though Cosmos Bank had no experience with smart cards, its desire to build on its accomplishments, garner additional market share, and solidify its leadership position led it to seize a singular opportunity. City within a City

The card was unique in the marketplace and met with great success, explains Julie Yang, MasterCard Director and Cosmos Bank liaison. Over 700,000 cards were issuedat a value of NT$40 billiongiving
Cosmos Bank, Taiwan

The smart card was an idea whose time had come.

cardholders access to cash at Maestro and Cirrus ATMs worldwide. With its Maestro and Cirrus-branded card, Cosmos Bank took a step ahead of its competition. But in 2001, when it issued its MasterCard co-branded, multi-application smart card, Cosmos Bank pulled way ahead of the pack. Moving to Chip Smart cards, which carry an embedded computer chip, had a place in the Taiwanese market but had been used mostly for loyalty applications. Though there had been

That opportunity was Core Pacific City (CPC). In development since 1986, CPC was planned and designed as the largest mall in Taiwannot to mention the world. Core Pacific City was destined to be a winner. Its huge space in downtown Taipei had thematic attractions catering to all age groups and demographics. When it opened its doors in October 2001, the 205,000-square meter Core Pacific City offered 1000 retailers, including 800 credit card and 200 cash only merchantsa shoppers paradise. Linked to the real mall was a virtual online mall, available 24 hours a day, seven days a week.

So customers could shop at CPC in person or on the Internet. Anticipated volume was estimated at NT$20 billion annually. Core Pacific City was eager to reinforce its unique identity with a co-branded card that consumers could use in the retail, entertainment, and dining establishments offered at its 15 different venues. It wanted a card that

Core Pacific City during the MasterCard World Cup Promotion, June 2002

In a Class by Itself: Core Pacific City - Taiwans Premier Destination See a movie or play, shop till you drop, sample exotic food, or attend a financial services seminar. All of this and more is possible at Taiwans city-within-a-city, the new Core Pacific City (CPC). CPC is a state-of-the-art 205,000 square meter (2,153,000 square feet) retail and entertainment complex in Taipei. The 19-story center has a massive 11-story, 60-meter diameter sphere supported by four columns as its dominant exterior element. Its the largest vertical retail center in Asia, climbing 12 stories above grade and descending seven below. CPC holds the distinction of being the largest mall in the world, housing over 800 retail establishments. Since it opened its doors in October 2001, CPC has been the hot, new destination for Taipei citizens as well as tourists from all over the globe. CPC is a landmark urban center a destination, a gathering placeoffering national and international goods, services, and cultural experiences. Though developed to meet the needs of Taiwanese citizens where shopping is a popular activitythe CPC concept is an idea whose time has come, according to Core Pacific Group chairman Tony Sheen. Although Core Pacific City is designed for Taiwan, with an emphasis on the habits of its population, we hope, with its success, that the model can move outwards to other regions in Asia, Sheen said. Fifteen different themes, attracting many types of consumers, are spread across the projects multiple levels. They include: The Grotto, located beneath the sphere, features a lush landscape, a three-story waterfall, and a koi pond. The Continent provides shopping with a European flair. Entertainment International offers fine dining and nightclubs, music, and restaurants. The Americas expresses the casual lifestyle of the urban sophisticate and showcases art galleries, home accessories,and more. CPC is making history as a model center and the undisputed number one attraction in Taipei.

Core Pacific City chose a market leader to provide the card: Cosmos Bank. Cosmos chose MasterCardthe only partner able to deliver the smart card technology.
would provide brand value and consumer loyalty in a secure transaction environment. Co-branded cards for shopping malls or department stores already existed in Taiwan. But Core Pacific City was interested in a technically advanced card seen as leading edge, echoing its own cutting-edge presence. CPC wanted to encourage cardholder loyalty for shopping with them and they wanted the card to eventually encompass all retailerscredit or cash. Core Pacific City chose a market leader to provide the card: Cosmos Bank. And, in turn, Cosmos chose MasterCard the only partner with the products and experience to deliver the required level of smart card technology. Technology, Project Expertise We wanted MasterCard as our partner, says Lu Chung-Huang, Executive Vice President and General Manger, Cosmos Bank Taiwan. They are the leading technology innovator in the industry and had the expertise to make the program a success. Getting a big idea was one thing, making it a reality was another. Cosmos Bank came to us because of our knowledge and experience and history with them of successful partnership, says Willie Fung, MasterCards General Manager for Greater China. We have the project management skills, technology partners, and technical support needed to develop and launch a multi-application smart card program. The infrastructure in terms of networks, merchant devices, and the issuing systems to support a secure EMV smart card was not in place. There were few indigenous suppliers of chip solutions in the country but solid interest from some Taiwanese companies. International suppliers were active in the market. The multi-application platform of the MasterCard/Cosmos Bank smart card needed to cover current applicationscredit and loyalty programsas well as additional applications, like the stored value

cash dimension, Mondex, that would be loaded onto the cards in the future. The long-term vision for the card was 510 years, explains Yang, so we needed a robust platform that could accommodate new applications over time. Thats why we chose MULTOS. The project partners included technology vendors covering cards, systems, terminals, consulting and installation, in addition to an acquiring partner, National Credit Card Center. Positioning the Card Since Core Pacific City was all new, equipping retailers and other vendors with the appropriate systems was in a way easier than trying to convert existing systems. There were still problems to overcome; though the cost of the smart card technology had fallen, it was still significant. And because of the newness of chip, there was some resistance to trying the unfamiliar. Around the world the EMV standard was maturing but the use of multi-applications was still quite new. This meant there was a lack of strong global case studies that could successfully illustrate smart card applications in the marketplace. We overcame objections by positioning the smart card as an attraction to the consumer, explains Yang. Additionally, government guidelines for the migration to the EMV secure standard helped to justify the use of chip.

Delivering Multiple Applications There are now more than half a million MasterCardbranded smart cards in circulation in Taiwan, with the number growing daily. CPCs 800 credit retailers have been successfully using the cards and cash vendors are joining the ranks. Were in the process of adding the stored value, or electronic cash, dimension to the card, using Mondex, for the 200 vendors who are cash only, explains Yang. These include vendors in the food courts and the taxi queue, as examples.

For Cosmos Bank, the co-branded card has established them as a leader in chip as well as one of the most advanced banks in the region.
About 70 percent of these transactions are small ticket transactions that will benefit from the convenience of having stored cash value within the easy reach of the card. Loyalty programs for shopping at CPC are one of the smart cards multiple applications with a system that awards points to customers for using their co-branded Cosmos Bank/CPC/MasterCard card.

For MasterCard, the successful development of this co-branded smart card has once again reinforced its role as a technology leader.
Building excitement with the public meant leveraging the exceptional marketing opportunities provided by the Core Pacific City development. There was considerable media interest in all aspects of the project which MasterCard capitalized on with pre-launch publicity and media placement. We did all kinds of advertisingfrom television to newspaper to billboards and bus ads, says Yang. There was co-marketing with the mall as well as consumer direct mail and direct sales. Contests encouraged customer applications for the smart cardwith prizes and give-aways for those who applied. Over a year in development, the program launched in August 2001 with 100,000 smart cards issued to consumers.

Stunning Success Whats the verdict on the success of the smart card program? Cosmos Bank, MasterCard, and CPC all agree here: it has been a resounding success. Core Pacific City is benefiting with increased sales, with 30% of credit card sales being made on the co-branded smart card, customer loyalty, and a reinforcement of its image with this advanced card platform. For Cosmos Bank, the co-branded card has established them as a leader in chip as well as one of the most advanced banks in the region. And as the marketplace develops, Cosmos is positioned to take full advantage as the migration to chip gathers pace.

The Cosmos Bank/CPC/MasterCard smart card has grown the banks customer baseincreasing acquisition, retention, and usage. In fact, the bank has moved into the top ten issuing MasterCard members in the market. For MasterCard, the successful development of this co-branded smart card has once again reinforced its role as a technology leader. Weve formed a strong partnership that is paying off at the bottom line and showing the industry and the competition that were at the vanguard of technology development, states Mr. Lu of Cosmos Bank. Our successful partnership here will serve us well as we continue to move forward with smart cards. Get All The Details For more information, please contact your MasterCard Customer Representitive today or e-mail us at e-Business@mastercard.com.

Ingredients for Success According to Cosmos Bank, getting a smart card program off and running requires foresight, careful planning, and expertise. The number of players necessary to launch a program is considerable. There are terminal and acquiring systems vendors, chip suppliers, and card providers. There are consulting and project management services and personalization systems. In order to make it work, Cosmos suggests: 1. Work with people who have done it before, i.e., MasterCard. 2. Develop a good, solid project plan. 3. Oversee vendor management closely. 4. Choose the right technology partnersexperienced players with a proven track record.

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OneSmart Case Study Series Cosmos Bank
2-9086 08/02